Employers Liability Insurance

Why should you want to cover your Employees with Employers Liability Insurance? Whether you want to or not this insurance is compulsory under the Employers’ Liability (Compulsory Insurance) Act 1968, as amended, and so it’s something that you should take very seriously. Sometimes though, especially if you use lots of different sub-contractors, it’s hard to know if you need Employers Liability Insurance or how to take it out. If you have had employees in the past and you are notified of a disease claim a disease claim you may need to trace your insurer and the Employers Liability Tracing Office [ELTO] may be able to help.

Usually you can’t buy Employers Liability Insurance on its own, though this is available, and it forms part of a Package Insurance policy or Combined Insurance policy or Combined Liability policy. Either way it's important that you get this right.

Employers' Liability insurance enables businesses to meet the costs of damages and legal fees for employees who suffer injuries or illness arising out of their employment. It doesn’t necessarily have to be your fault for an employee to be able to claim as these injuries may be due to the action of other employees or it is alleged that you are in breach of legislation designed to protect them. Injured employees can even seek compensation if the business goes into liquidation or receivership and the National Health Service can also claim the costs of hospital treatment - including ambulance costs - when personal injury compensation is paid.

KeyNote:- This applies to incidents that happened after 28 January 2007. Read about the Injury Costs Recovery Scheme on the Department of Health (DoH) website here.

By law, an employer must have Employers Liability insurance and be insured for at least £5 million. Most insurers automatically provide cover of at least £10 million. Your Employers Liability insurance must cover all your employees in England, Scotland, Wales and Northern Ireland.

If your business is not a limited company, and you are the only employee or you only employ close family members, you do not need compulsory Employers Liability insurance. Limited companies with only one employee, where that employee also owns 50 per cent or more of the issued share capital in the company, are also exempt from compulsory Employers Liability insurance.

However, there is nothing to prevent an exempt employer from choosing to buy Employers Liability insurance, and many do - because of the financial security it can provide.

The Health & Safety Executive (HSE) is responsible for enforcing the law on Employers Liability insurance and currently you can be fined up to £2,500 for each day that you do not have appropriate insurance in force.

There is no strict definition of what an employee is but generally, someone is classed as an employee if:-

they are under a contract of service

you deduct National Insurance contributions and income tax from the salary you pay them

you control when, where and how they work

they cannot employ a substitute when they are unable to work

KeyNote:- This can be a grey area, especially within the construction industry or other businesses where sub-contractors are generally used. As a rule of thumb if you are just paying someone for their labour then you should treat them as an employee.

We deal with many Employers Liability policies available in the market from AVIVA, AXA, FORTIS, MMA, Allianz, Zurich, Groupama, RSA, NIG and a lot more than this. These contain a wide definition of employee that will cover most circumstances.

KeyNote:- Most insurers will not issue Employers Liability in isolation and would like this cover to be part or a Combined Liability policy with both Public and Products Liability

KeyNote:- You can download the HSE Guide To Employers Liability [HSE40] here.

Useful checks

Your policy must be issued by an authorised insurer otherwise it will not be valid and you risk breaking the law.

KeyNote:- You can check that an insurance provider is a member of the Association of British Insurers on the ABI website, here. We can also tell you which companies offer suitable Employers Liability insurance policies.

When you take out a policy you will receive a certificate of employers' liability compulsory insurance. You must display a copy of this document where employees can easily read it.

You can display it either:

as a paper copy, eg as a photocopy pinned to a notice board

electronically, eg as a page on your intranet or as a document in a shared folder on your network

You should also make these certificates available to health and safety inspectors on request.

If you do not display your Employers Liability compulsory insurance certificate or refuse to make it available to HSE inspectors when they ask, you can be fined up to £1,000.

You are strongly advised to keep, as far as is possible, a complete record of your employers' liability insurance for a period of 40 years. This is because some diseases can appear decades after exposure to their cause and former or current employees may decide to make a claim against their employer for the period they were exposed to the cause of their illness. If you haven't kept the necessary insurance details you risk having to meet the costs of such claims yourself.

KeyNote:- If you have lost your details have a look at the Employers Liability Tracing service here.

New FSA regulations for Employers' Liability Insurance Policies

In February 2011, the Financial Services Authority (FSA) published new regulations that change the way that insurers and intermediaries record EL policy data.

Intermediaries, such as brokers, managing general agents (MGAs) and delegated authorities (DAs), are a vital connection between the insurer and the insured and therefore play an important role in the success of the Employers' Liability Tracing Office (ELTO).

What does the FSA say should be captured and supplied now?

The FSA's current regulations compel insurers to publish the following information, within three months for:- new and renewed EL policies from 1 April 2011

- new and old policies for which claims are made on or after 1 April 2011.

Who should be providing this data to insurers?

This data must be collected and supplied now for all commercial EL policies including those managed by DAs and schemes.

How are insurers collecting and publishing the EL policy data?

Insurers are collecting EL policy data in different ways. Some insurers are happy for intermediaries to adapt existing borderaux whereas others are requesting information to be supplied in an Excel template.

It is therefore important that intermediaries continue the dialogue with their insurers to ensure that information is presented in a format that allows that insurer to upload to the Employers' Liability Database (ELD).

What are intermediaries responsible for?

Intermediaries should work with their insurers to ensure that the EL policy information that is required to be loaded onto the EL Database now is being supplied in good time.

What information is available for intermediaries?

BIBA has helped to produce a guide specifically for brokers, MGAs and DAs which is available to download. Talk to your insurers that are members of ELTO - guidance has been provided to them to make sure that EL policy data is captured and supplied in a consistent way.

Can intermediaries make a head-start on the FSA's April 2012 additional data requirements?

From 1 April 2012, the FSA will also require insurers and intermediaries to capture and record subsidiary company information and the Employer Reference Number (ERN), commonly called the 'Employer PAYE Reference'. Many underwriters are making a head start and started collecting this information in April 2011 in preparation for the deadline.

ELTO have produced a new one-page guide to supplying EL data. This guide is a tool for you to use and includes tips on what information needs to be supplied and the timescales it is needed in.